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VT Transaction+

Note: If you are not on cash accounting, do not follow the steps below, please instead refer to Entering a DRC sales invoice

To enter a DRC sale outside of the cash accounting scheme:

As explained in Sales by subcontractors (cash accounting), businesses who use cash accounting for VAT, are normally required to exclude any DRC transactions from the scheme and instead account for them under the standard accounting method (although there may be exceptions to this depending on your particular circumstances).

If you are required to exclude DRC sales from the cash accounting scheme, enter these transactions as follows:

1.You will already have selected Cash Accounting in the VAT set up dialog (Set Up>VAT). Leave this setting as Cash Accounting.

2.Create a new Income account (Setup>Accounts>All>New) and name it something like ‘Domestic reverse charge services’.

DRC account income

3.Although it may seem counter-intuitive, do not tick the box that says ‘Entries analysed to this account are normally within the scope of VAT’ as you do not want this transaction to be picked up in the VAT return under the cash accounting method. Instead, the sale will be picked up in the VAT return by entering the journal described in step 5.

4.Enter the sale using a SIN, SIN or REC transaction, but with no VAT:

Total

Net value of sale

Input VAT

No VAT

Net

Net value of sale

In the Analysis Account field, select the account you created in step 2. If you need more analysis accounts, create them from new as described in step 2, ensuring that they are set up as not being within the scope of VAT. Do not select any analysis accounts that are within the scope of VAT.
For example, for a sale of £100 of services:

SIN0088

5.To record the net value of the sale in the VAT return, use the JRN function (or journal import function) to enter the following journal with the same date as the sale transaction in step 4. In this example, the net value of the sale is 100.00.

You should make reference to the associated sales transaction number in the Transaction details/entry details field, so that you can trace the transaction back to the invoice.

Net sale

Screenshot of a journal entry to record the net value of the sale in the VAT return

Applying the CIS tax deduction

If you need to also apply the CIS deduction, follow the same steps above, with the only differences being the following in step 4:

an additional line is entered for the CIS deduction

the value in the Total and Net fields is the VAT exclusive amount less the CIS deduction

For example, for £100 (exclusive of VAT) of services, with a CIS deduction of 20%:

SIN_CIS

The Debtors: HMRC (CIS) account needs to be created by selecting Set Up>Accounts>New. Do not tick Entries analysed to this account are normally within the scope of VAT.

CIS debtor